SMALL CAP IDEA: Gaming Realms targets US gambling jackpot
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Gambling isn't legal across the whole of America yet but having lifted a 1992 ban in 2018 many US States are beginning to approve online, in-person and sports betting.
And companies are starting to make the most of the untapped market.
Paddy Power parent group Flutter Entertainment and Ladbrokes owner Entain both have significant interest in the US, owning sportsbooks FanDuel and BetMGM respectively and according to recent trading updates, both believe it is a market set to boom.
It's not just the FTSE 100 gambling big fish taking advantage, however.
Growth: Shares in Gaming Realms are up close to 40 per cent in the year-to-date
Gaming Realms, a developer and licensor of gambling content, is also enjoying plenty of growth Stateside, recently reporting a 37 per cent year-on-year uptick in North American first-half revenues.
Known for its Slingo series of games, which mixes slots with bingo, shares in the group are up close to 40 per cent in the year-to-date and management is confident a run of 13 consecutive half-years of growth is not going to end soon.
Accounting for 45 per cent of the London-listed firm's total content licensing, the offering in the US is constantly growing through new deals with partners such as Pokerstars, which recently penned an agreement with the group in New Jersey to license one of its games.
Already having 57 different offerings live through 20 different licensees in New Jersey, gamblers in Pennsylvania, Michigan, Connecticut and, of course, Nevada can also now play some of Gaming Realms' products.
One of the most versatile parts of Gaming Realms' Slingo games, which it bought the rights to in 2015 for $18million, is the ability to adapt it based on customer demands.
Launching spin-off versions such as a Slingo Masked Singer, Slingo Riches and Slingo Cleopatra, Gaming Realms has also been able to create versions specific for US companies and audiences such as:
- Slingo Shark Week in collaboration with Warner Bros Discovery
- Slingo Rainbow Riches in partnership with US developers Light and Wonder
- Detroit Lions Slingo with BetMGM
- And how could anyone forget Lucky Larry's Lobstermania Slingo, teaming with King Show Games
'The potential from rolling out its full content library to all of its partners is clear,' said an analyst at broker Peel Hunt.
No, Gaming Realms hasn't inked a deal with Disney to spin out an Aladdin Slingo, but it is exploring new countries for its games spanning numerous continents.
Boss Mark Segal spoke with Proactive and said: 'At the moment, we see a lot of growth in Slingo. It's a very popular game with players around the world and we are able to build innovative games.'
Segal claims a huge part of this success has come from 'growth into new markets', mentioning the strong performance in Canada and the US but also pointing to less explored areas.
'We have applications now into Greece and for South Africa and we'll be looking for more regulated markets.
'We've had success over the last years, growing in some of the more recently launched markets for us, whether that's Italy or Spain or the Netherlands,' the Gaming Realms boss added.
In the last month, the group also went live in Portugal, agreeing on a deal with operator Betclic.
Buyouts are extremely commonplace in the gambling industry, highlighted no better than by the sheer number of bookies owned by Entain and Flutter, which includes Betfair, Ladbrokes, Coral, Sky Bet – and William Hill owned by 888 Holdings.
'In an industry where M&A still thrives, we believe Gaming Realms is an attractive potential takeover target,' said Investec.
'The company's unique Slingo product, and its many variants, give it a considerable competitive advantage, with the potential to keep launching in new geographies and with new clients for little additional costs.'
Investec points to the strong management team, which is comprised of industry veterans including Segal who was a former finance director at bwin.party and chairman Michael Buckley, the ex-chair of Cashcade, one of the UK's pioneering online bingo providers.
Risks include tightening regulation in established markets such as the UK but currently trading on an enterprise multiple of 7.3 times and earnings [P/E] multiple of 17, analysts at the South African bank believe these figures 'undervalue the business significantly'.
Investec reckons its share price could rally ahead from its current 35p share price towards 48p, representing a gain of over 33 per cent.
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